Marc Ladreit de Lacharriere….’malign mercenary’

Recent decisions analysed by The Slog

Fitch was first to cast doubt upon France’s credit rating, first to upgrade Greece after last week’s debt-swap, and yesterday put Britain on negative outlook for its AAA status. Can we be sure these decisions are truly objective? One hugely notable feature of the last twelve months has been the growing campaign by indebted sovereign politicians to mouth off against the ratings agencies, but as ever this reflects only the petulance of thos who back into the spotlight of life.

Rather, I think, we should look more closely at the monied people behind Fitch.

The privately-owned and family controlled Hearst Corporation has spent some $1.4 billion buying into the ratings agency Fitch since March 2006. As of three weeks ago, Hearst owns 50% of it. I still don’t really understand why anyone would want a company whose decisions make or break markets to be in the hands of a media-owner, but there you are.

The other half of it is owned by Fimalac – a French combine that is the personal fiefdom of Homme d’Affaires Marc Ladreit de Lacharriere. On selling the last of his majority in Fitch last month, de Lacharriere stipulated that he must remain Chairman of Fitch come what may until he reaches 80 years old – in nine years time. Why?

Ladreit de Lacharriere is a founding member of the so-called Robespierre Group who were at the prestigious Ecole National d’Administration together at the end of the 1960s. A billionaire, he has been described by Le Monde as ‘the most powerful unknown  quantity in France’. Influential Paris magazine Les Inrocks last week called him ‘a financier and malign mercenary’.

M. Lacharriere is a personal friend of Jacques Chirac, and a right wing cultural philanthropist. Fitch generated over a third of Fimalac’s profits when it was wholly owned by Fimalac: the agency’s  earnings having trebled during Fimalac’s ownership, but nevertheless since 2006 the French entrepreneur has sold half of it to Hearst. Why? Until February 18th this year – when the Hearst holding hit 50% – Fitch had been the only-non U.S. rating agency among the world’s three largest rating firms.

Significantly, Lacharriere detests French President Nicolas Sarkozy.

Let’s trace some of Fitch’s recent decisions.

Last year it was the first ratings agency to put France on negative outlook for its sovereign credit rating. As a result of this, Sarkozy’s poll popularity slumped to 32%.

The French banks stand to lose by far the most if Greece defaults, and Lacharriere counts most of the senior players as personal friends. Bizarrely, it upgraded Greece earlier this week – two days after an official ISDA default decision – a decision most observers found inexplicable. But then, both France and America dread an uncontrolled Greek default. And as of last month, Hearst owns 50% of Fitch.

This later decision contrasts completely with what Reuters reported as the Fitch position last June: ‘”Fitch would regard a [Greek] debt exchange or voluntary debt rollover as a default event and would lead to the assignment of a default rating to Greece” Andrew Colquhoun, head of Asia-Pacific sovereign ratings with Fitch, said at a conference in Singapore.’

Fitch has done an about-face. Why?

Yesterday, it alone put the UK on warning of losing its AAA sovereign credit status. Does that have any special significance? Who knows? Because you see, we know even less about the Hearst empire than we do about Fimalac.

120 years after its foundation and development by the notorious William Randolph Hearst, the Hearst Corporation remains one of the top ten privately, family-owned businesses in the world. It has never floated, and unlike Newscorp it does not court publicity in any way. In stark contrast to the Murdoch family and entourage, Hearst displays no political bias at all. In fact, its political contributions are scrupulously kept at 49% each for the main Parties, and 2% for minority political causes. But in excess of 300 magazine titles and 47 websites around the world are controlled by this one family firm. A firm that has invested well in excess of a billion dollars in moving towards a controlling stake in a ratings agency. Why?

I’ve been Googling about Hearst for the last two days, and I can tell you their profile is beyond low and well into secretive. I have yet to find a single rationale, mission statement, future projection or marketing viewpoint from the company. The jobs site Vault has no – zero – insider reviews of what it’s like to work at the company. Of all the business articles I have found relating to management changes, hirings and acquisitions, not a single one contains any quote as to the game plan or why they did something, beyond the usual spin vapours about “an ever-changing media landscape” and other similar bollocks.

“I would call them patriotic,” said a senior New York media honcho who didn’t want to be named “and that’s it. They’re the nearest thing we have over here to the Kremlin”.

There is every sign that the Hearst Corporation is, in fact, a very traditional company and absolutely squeaky-clean. But do we think that a secretive family (descended from a man who made or broke US Presidents) and a French billionaire who wants Sarkozy out and Greece to survive, are really what one would ideally want as the owners of a global business and sovereign credit ratings company?

Contemporary Crony Capitalism finds such questions, on the whole, naive and laughable. But they aren’t.





  1. Does this really add up? Surely, if this “malign mercenary” wants Sarkozy out, a certain way to make that happen would be a Greek default before the election, placing a couple of French banks up the proverbial creek and the French economy in intensive care?

    On the other hand, if the guy is right-wing, would he really prefer Hollande over Sarko, regardless of any personal animosity?


  2. ‘But do we think that a secretive family (descended from a man who made or broke US Presidents) and a French billionaire who wants Sarkozy out and Greece to survive, are really what one would ideally want as the owners of a global business and sovereign credit ratings company?’

    As opposed to what, though? An EU-mandated agency? Maybe you’re right and the situation isn’t ideal. On the other hand the alternatives could be even worse.


  3. Well this is the real problem in our modern world. We want facts – and there aren’t any!

    What is going on? Well, let us start looking not for facts but metrics. JW, as an ex ad/marketing man you should be able to deal with that. Let us start with 300+ publication titles. Look at what they are saying – what their general approach is to the political scene. Taken as a whole, undiscriminated lump, there will be salient points from which you can begin to understand their motives. Watch as these change. There are realms of human activity that leave no factual trail.

    Of course, there is the other possibility – that Hearst are only interested in the money and the businesses that generate it. Politics after all will have little effect on generalities of public opinion at national level. Allowing for both parties in your marketing policy – and theirs will be big enough – will make you more profits than Democrats or Republicans alone. It would be like having a Guardian and Telegraph in the same stable, you make money from both. What does it matter what the editors think as long as the profits are yours?


  4. In the world of ratings Fitch is No. 3 and a long way behind S&P and Moody’s.
    In my experience with documentation, I never saw Fitch included as a ‘Rating covenant’, though the inclusion of Moody’s or S&P or both was standard.
    Fitch therefore is mainly news value for lazy MSM journalist rather than serious credit event value.


  5. Can someone answer a genuine question, please …. what is the importance of these rating agencies? Do they simply provide guidance for prospective investors or do they apply some mechanism that has a direct and authorative effect on the markets?
    My own view has been that they are a bunch of analysts who look at the viability of a nation and make suggestions on which investors make a decision. If that is the case, what is the big deal?


  6. Pingback: John Ward – Credit Ratings: The Hidden Persuaders Behind Fitch – 15 March 2012 | Lucas 2012 Infos

  7. Regulation & being made accountable is the real problem whether it be banks or rating agencies. If the rating agencies had done their job properly in the first place & not rated corporations like Lehmanns & AIG as triple AAA, we might not be in the present mess. I personally don’t care who is running these organisations as long as they do their job properly & are not above the law.


  8. I believe it is the former role. But one cannot ignore that their ratings are carefully watched by politicos and others too.


  9. Add: the “big deal” is that if they downgrade a company or sovereign then borrowing costs for them rise.


  10. They were not carefully watched when they had Lehmanns & the rest marked as AAA just before they collapsed. The SEC has uncovered fraud amongst those who worked for them just before the onset of the crisis, but surprise, surprise hasn’t yet acted on the information they have gathered. Strangely enough these people received good positions in various banks, if the politicos ever give the SEC a real set of teeth, there will be quite a round up & some justice. I live in hope.


  11. @Bankrupt. Many thanks. What to me is weird is that what should be merely informed guidance from the agencies is received as Holy Writ.


  12. Test comment after the following from WordPress:


    We’ve recently updated our commenting system. Now, if someone tries to comment with an email address that’s attached to a account, they’ll need to sign into before they can comment.

    Which gave the following error message:

    You must be logged in to comment with that email address.

    Sadly WordPress are not good to their word. I still cannot login with my chosen email address – which is not connected to a WordPress account. In short, I can only post if I am logged in to WordPress. Is this the new freedom?


  13. @Everyone

    the problem with the agencies is the same as the problem with the EU. The agencies state that they look at THE PUBLISHED FIGURES THAT THEY ARE SUPPLIED WITH in order to arrive at a rating.

    Sadly this takes no account of things that cannot be accounted for on paper. Nor does it take any account of anything that the figures might imply.

    In the circumstances it is quite understandable that Lehman’s would be AAA rated on the day before their denoument. Why? Because the figures they gave the agencies told the agencies that story. That the figures were forged or incorrect at the time of press is neither here nor there to an agency. They get paid to do their job. Which is the above.

    They do no more insight than a corporation that sticks its nose to the bottom line whilst its clients walk away in droves due to dissatisfaction with their service. Only when it is too late will the corporation notice that their profits have fallen. then they will decide to close the company because its profits are not sufficient. The reasons for the failure would not be understood, and anything that could be done to avoid the situation would be totally missed owing to their not having the facts.

    In short, if you are running a business, you need more than the facts if you are going to survive. You need a new paradigm.

    @BT someday you are going to have to trust somebody. Even if it is only your wife. Society is based on trust. Not trusting will not solve a society’s problems. You need to start somewhere and learn that not everyone is suspect, there are even honest politicians! Tarring the good and bad with mistrust is as bad as the company that does not look beyond the bare profit and loss figures.


  14. @Steve: The ratings agencies were watched before the sub-prime scandal. By some dumb bank investors who went ahead and bought junk. But their assessments of various borrowers and sellers are probably not watched enough (this may be what you’re saying).


  15. @Gemz:
    I’d be surprised if the ratings agencies only use data supplied from the company they’re assessing. Nevertheless, it’s not an exact science. There was a time when I knew whether UK house prices were going to rise or fall in the 1-2 years ahead and I never used any data to make my assessments. I was never wrong!

    Your views of who I trust or not are excessive. I generally trust people who have a track record of trust or have no particular agenda in advising me one way or the other. But there are plenty of people & organisations who fail to meet this criteria. So if I need to trust someone, it becomes a step-by-step process until they have proved themselves. In the past several years here’s a few who have demonstrated they can’t be trusted: BT, Barclays Bank, Lloyds Bank, Santander Bank, HSBC, nPower, TAP Portugal, local VW dealer. I actually have a list of companies that I will never do business with again due to their crooked practices.


  16. Well you never know, it’s a couple of weeks old but up until today I didn’t realise the story was alleged by Judge Napolitano. He is although a media entity & is or was a Friedmanite. I just think he must know something to say something & it is kind of strange that it has all gone quiet since. I still live in hope, the bankers resigning bit is backed up in lots of other places.


  17. I wouldn’t get your hopes up, as the judge said if the Govt. knew and the information was only withheld from the public, then no crime committed.


  18. Chris, when the US srtikes at Iran the oil price will spike, if they drop the price beforehand which they have effectively done, then the spike will appear less severe.
    Just think Cameron swapped our oil reserves for a ride in Air Force One with Obama……


  19. Agreed, their motives are obvious. No release from the SPR for decades and now 2 in less than 6 months!

    Hope and change sure looks similar to tyranny and incompetence.

    This will, once again, not end well.


  20. @JW
    John this is one of your best –very best exposes ever and I am very thankful someone is able to tell me who owns Fitch etc.

    What I’d like to know is what you make of the FT headline today where Premier Wen Jiabao is reported to have warned about a possible return to the ‘cultural revolution’ (not in any way his preference, by any stretch) if ‘urgent political reforms’ are not got underway?

    Maybe he’s giving a wise farewell as Ike did?

    You can fill in all the blanks. Certainly gave me pause picking up that pink toned paper on the way home from the banker who hadn’t yet heard of 100 year gilts but was supremely unperturbed and as polite as a man could possibly be.


  21. pfgp
    Imagine what it’s like having these numpties running one’s site.
    They’re about to change my stats format. I can hardly wait.


  22. Geo
    I agree with you. ‘Democracy’ is one of these value-laden political footballs in China.
    We need to keep a close eye on whether the young military hotheads are gaining in influence: that would be disastrous for everyone.


  23. @JW

    if you want stats, you can install Piwik or use Statcounter.

    As to the problems with leaving comments I am still waiting for WordPress to get back to me.


  24. FWIW, I’ve not experienced any of the problems others are having.
    I am using Firefox Palemoon browser with Ghostery plug-in running which blocks all the google crap, bugs, cookies, web-tracking and strips out all the nasty scripts that exist on websites, including those wretched ads that some folks see.


  25. Actually you cannot install plugins on a hosted blog afaik
    You need a self hosted blog on your own domain to be able to use plugins or custom themes


  26. Incredible. I think Geithner is going to get away with it. I don’t believe that Obama’s Justice Department, headed by his crony Eric Holder, who oversaw thousands of illegal purchases of guns walked into Mexico (Fast and Furious operation of the Bureau of Alcohol, Tobacco, Firearms and Explosives) that killed at least 200 Mexicans and 2 US Border Patrolmen and who refuses to acknowledge any responsibility and illegally refuses to release thousands of relevant documents to the Congressional investigating authorities, will arrest Obama’s Treasury Secretary.


  27. They simply provide guidance to investors. The ratings of course influence the markets without any formal or authoritative means. The ratings agencies have come into a great deal of criticism because of their completely incompetent rating of mortgage backed securities AAA which helped to create the financial meltdown of 2008. Very few in the US place much faith in them. For one thing they are paid by the entities they rate, thus they can hardly be objective in their ratings.


  28. JW You’ve mentioned it before but time again to think about the idea of a new system, one that excludes money. In its simplest what about a system based on ‘exchange of services’ (idea is likely not new) which could be based on the concept of a wheel rim and spokes. Each spoke represents a service which would be rated according to an agreed value based on an individuals/ groups personal input into achieving the skills/ qualifications to provide that service. Thus a system could be developed that since it was only services being exchanged the ‘money men’ could be dispensed with becoming redundant having no service to offer other than ‘making more money’.


  29. @kfc: MAC? Not me old bean. I use my own built PC systems. This one has XP-Pro-SP3 on it (Win7 is a crock IMVHO).
    In most browsers, you hit the Ctrl + combo keys to increase font size and Ctrl – to reduce it. Ctrl 0 resets it to default (that’s zero not capital o).

    @Sike: I was referring to a plug-in installed in Firefox Palemoon. I have 6-7 other plug-ins too, but it’s Ghostery that strips out most of the website scripts and bugs.


  30. Well, the problem is that exchange of services is just too inflexible. Barter is cumbersome and homo sapiens, though not known for making exclusively wise decisions, has found that an easily exchangeable general commodity, with an intrinsic value, provides greater economic freedom. What IS the problem is fiat money, with no inherent value, which is treated as being infinitely elastic – a prime example of which is printing it in order to avoid the natural and desirable corrections of the cycle. History is littered with examples of how this always ends badly – just as it has always been the state that has abandoned commodity currency for political objectives. I’m with the Austrians on this one, money is fine as long as it has (reliable) value. This nurtures responsibility as it is comparatively inelastic and thus harder to abuse, but doesn’t, as the monetarists would have us believe, strangle the real economy.

    Seagoon: “Bloodnok, what are you doing?”
    Bloodnok: “Digging for earth.”
    Seagoon: “Any luck?”
    Bloodnok: “No, nothing but gold…gold…

    Yes folks, I”m old fashioned that way.

    During the early 70’s I studied in Bristol along with Keynes’ granddaughter; as we still have friends in common, it’s tempting to get in touch and ask if he left any instructions on how to turn the effing thing off..


  31. So the ratings agencies are really just tarted up publicity burueaus….. im still not sure though how much they are paid and by whom? Also why someone would want to pay a billion for one of them at a time when no one is likeley to believe anything they are going to say?


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